The deep-rooted fear of telling the truth in supply chain planning has assumed disproportionate dimensions in recent months. So have the costs associated with this lack of honesty.
Businesses are struggling to get a genuine picture from supply chain planning processes. Sales people are producing forecasts that are well above what they think will really happen, because anything less is unacceptable. Planners are preparing production plans that are unrealistic on the capacity front, because there seems no end to the stock-out situation. Supply chain managers are asking teams to keep raw material shortages quiet to avoid unwanted attention. These are a few of the real-life examples I have encountered lately.
Businesses have become obsessed with showing signs of recovery. As a result, any hint of a gap between the budget and the forward plans gets everyone running for the door before the boss can say: "It's economy class from now on!"
Bad news has become unacceptable. It's ironic, since firms have woken up to supply chain planning and are keen on building realistic views ahead of the demand, capacity requirements and inventory levels.
Mind you, it's no good for management who must behave like grown-ups when given an unfavourable picture. Gap management between the budget and the forecast ought to be constructive. As long as gaps are identified enough in advance, there should be plenty of options to consider.
If we kid ourselves about targets and only face the music when the song is nearly over, we have fewer, more costly, options. Supply chain planning is only worth it if plans are realistic and honest. Its aim is to combat surprises.
Key contact
Hugh Williams is founder of supply chain planning specialist consultancy Hughenden. www.hughenden.net